i. provided by official agencies, including state and local governments, or by their executive agencies; and

ii. each transaction of which:a) is administered with the promotion of the economic development and welfare of developing countries as its main objective; andb) is concessional in character and conveys a grant element of at least 25 per cent (calculated at a rate of discount of 10 per cent).”

ODA is the basic financial support used to develop the building blocks of nations, from healthcare and education services, to building infrastructure. Once these are firmly in place, nations can typically start to attract or develop other sources of development finance, as they move up the income scale.

ODA can flow directly from a donor to a recipient country (bilateral ODA) or be provided via a multilateral agency (multilateral ODA).

More Detail

The DAC sets the official definition of ODA, see above, and provides instructions through reporting directives. A guidance note, Is it ODA?, provides a summary of what can and cannot be counted as ODA or a concessional flow.

1.2 How aid (ODA) fits with other financial flows related to development

As a country develops, it can often create its own virtuous circle of investment and development that drives progress up the income scale. Experience shows that many of the fundamentals of a modern society such as good health, sanitation, education and governance systems, which are often the focus of ODA, have to be in place before the private sector has the confidence to invest, often with a varying level of support from the official sector. This is reflected in the mix of development finance flows that are seen in different country types as defined by the United Nations.

The long term trend sees increasing numbers of countries moving up the income scale and attracting more, and an increasing number, of kinds of development finance. Looking across a number of types of development finance all have grown significantly in recent years. However, it is also useful to look beyond the absolute numbers, and to look also at the share of each type of development finance.

Net ODA has gone up by 59% since 2000 (USD 84.18 bn in 2000 to USD 133.72bn in 2011) while non-ODA flows have grown 55% over the same period (USD 266.2 bn, 2000 to USD 413.8 bn 2011). However, remittances have boomed, up 180% between 2000 and 2011 (USD 123.3 bn, 2000 to USD 345.5 bn 2011). Source: DAC statistics, USD billion, constant 2011 prices, World Bank for remittances.

1.3 What is the difference between bilateral and multilateral aid (ODA)?

Bilateral aid (ODA) represents flows from official (government) sources directly to official sources in the recipient country. Bilateral ODA may go towards providing general budget support to the recipient country or be used by a government agency to deliver a specific project, such as a Ministry of Health delivering a vaccination programme.

Multilateral aid (ODA) represents core contributions from official (government) sources to multilateral agencies, such as the many agencies of the United Nations, where it is then used to fund the multilateral agencies’ own programmes.

Bi/Multi (counted within bilateral aid) is the term used when a donor contracts with a multilateral agency to deliver a programme or project on its behalf in a recipient country.

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1.4 How much of the Aid recipient countries control (CPA) and aid projections (FSS)

Country programmable aid (CPA) is the portion of ODA donors programme for individual countries and over which partner countries could have a significant say. CPA is much closer to capturing the flows of aid that go to partner countries than the concept of ODA, and has represented on average 56% of DAC members’ gross bilateral ODA over the past 5 years.

The Survey on Donors´ Forward Spending Plans is designed to overcome a lack of transparent and predictable information on aid allocations which is a key bottleneck in making aid more effective. To help efforts towards greater predictability, the OECD conducts annually a survey on donors’ forward spending plans, a unique instrument that tracks future aid receipts by developing countries for the next four years.

2. See the numbers - ODA

Interactive charts showing what donors give and what recipients receive with sector breakdowns.

2.1 The big picture - aggregate ODA flows by donor (2012 flows)

There are two ways of looking at ODA provided by donors and received :

1. In terms of volume i.e. USD 2. As a percentage of a country’s wealth (using a donor country’s Gross National Income (GNI))

The best known target in international aid is the UN ODA target of 0.7% of GNI which dates back to 1970. Since then, many donor countries have re-affirmed their commitment to meet, or surpass, this target. You can read more about this target and how donor countries have performed against it in section 3.

3. History of ODA

Target setting plus historic levels and evolution of ODA.

3.1 The history of the current 0.7% of Gross National Income as aid (ODA) target

The story of these targets started in 1958 when the World Council of Churches suggested that at least 1 per cent of contributing countries’ national income should be devoted to grants and generous loans. This became an official UN target for total net official and private flows in the 1960s and was widely endorsed by DAC members.

In 1970 a UN Resolution agreed that within the 1 per cent target: “Each economically advanced country will progressively increase its official development assistance to the developing countries and will exert its best efforts to reach a minimum net amount of 0.7 per cent of its gross national product at market prices by the middle of the Decade.” The DAC has published brief notes on the 1 per cent target for total flows and the 0.7 per cent target for ODA.

From 1960 to 1990, net ODA from DAC donors rose steadily in absolute terms. By contrast, total ODA as a percentage GNI fell between 1960 and 1970, and then cycled between 0.27% and 0.36% for a little over twenty years.

Between 1993 and 1997, net ODA flows fell by 16% in real terms due to fiscal consolidation in donor countries after the recession of the early 1990s. Aid then started to rise in real terms in 1998, but was still at its historic low as a share of GNI (0.22%) in 2001.

Since then, the political commitments made in Monterey in 2002 and by the EU, G8 and UN in 2005, all seem to have contributed to an increase in ODA flows as in 2005 and 2006 aid peaked due to exceptional debt relief operations for Iraq and Nigeria.

Despite the recent financial crisis, net ODA flows have continued to rise and in 2010 reached their highest real level ever at USD 129 billion. This demonstrates how effective aid pledges can be when they are made on the basis of adequate resources and backed by strong political will. More recently, net ODA levels have again slipped back to USD 125.9 billion in 2012, reflecting the most recent set of economic challenges faced by DAC donors.

The OECD is working to devise a new, broader measure of official support for development to reflect big changes since the concept of ODA - or official development assistance - was devised. Private capital flows are now much bigger than traditional aid and there has been a geographical shift in where the world's poorest people live.